Local financial regulator—California Department of Financial Protection and Innovation—abruptly shuttered Silicon Valley Bank (SVB) last Friday due to "inadequate liquidity and insolvency".
"As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined," the Federal Deposit Insurance Corporation (FDIC), stated.
FDIC has been appointed as the interim receiver and has since protected insured deposits with Deposit Insurance National Bank of Santa Clara. According to FDIC, all insured depositors will receive their deposits today, meanwhile, uninsured depositors will receive "an advance dividend within the next week".
SVB is a 40-year-old financial institution that catered to the tech industry and that was the 16th largest US bank before its sudden collapse. The company's stock tumbled 60% on Thursday and plunged another 70% on Friday before trading of its shares was halted.
"30% of Y Combinator companies exposed through SVB can’t make payroll in the next 30 days," YC's president, Garry Tan, tweeted. The Silicon Valley-based accelerator is on the cap table of over 90 African companies, per BD Funding Tracker.
In 2021, SVB led a $100 million investment into Chipper Cash, whose valuation dropped by 37.5%—from $2 billion to $1.25 billion last year. Others who participated in this round include existing investors — Deciens Capital, Ribbit Capital, Bezos Expeditions, One Way Ventures, 500 Startups, Tribe Capital and Brue2 Ventures.
The company has since conducted several layoff rounds and was also affected by FTX's liquidity crises.
"We had a very limited amount of money (only about $1 million) held in our SVB account at the time the bank was taken over by the California regulator," according to Chipper CEO, Ham Serunjogi. "SVB made their investment in Chipper in 2021 and we received those funds as soon as that round closed...and SVB owns a very small part of Chipper; [about] 2%."
Incorporating in business-friendly locations like Delaware in the US is often a requirement for African startups who want to access venture funding from foreign investors. Most of these startups use SVB and Mercury to set up US-domiciled bank accounts to receive payments and investments from international partners.
Chipper says it is amongst the depositors that will receive their funds from FDIC on Monday. At the time of this report, the fintech is the only African company that has admitted its exposure to SVB. Meanwhile, Nigeria-based startups like Risevest and Vesti say they are not exposed to the California-based bank.
Founded in 2018 by Ham and Maijid Moujaled, Chipper Cash offers a no-fee peer-to-peer cross-border payment service in Africa via its app. Its services are used across seven African countries—Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya.
In 2021, the company expanded to the UK, to enable people to send money from the European nation to Chipper Cash's African markets— and the US—to facilitate peer-to-peer money movement from the US. to Nigeria and Uganda. Chipper Cash reportedly has over 5 million users across these markets.
Last year, the company disclosed that it intends to make its "first major acquisition" by acquiring Zambian fintech company, Zoona, to enable its expansion into the Southern African country.